Reserve Bank Governor Lesetja Kganyago during a Monetary Policy Committee press briefing at the South African Reserve Bank in Pretoria. Picture: Oupa Mokoena / Independent Newspapers
The rand gained some strength against the dollar on Thursday morning and was holding at R18.87 to the US currency as South Africans await the decision by the Reserve Bank on whether or not to cut interest rates.
The rand has been weak over the last two weeks and on Monday was trading at over R19 to the dollar.
At its height the rand hit R19,21 on Monday at 6:30pm but slowly gained ground as the week progressed.
Last week’s weakness and pressure against the dollar could be attributed to the US delaying interest rate cuts. The rand was also impacted negatively by continued attacks in the Red Sea, according to Nedbank’s weekly economic monitor.
The rand’s ability to gain some strength in the last few days could be attributed to the the fact that South Africa’s inflation numbers fell for a third consecutive month.
Annual consumer price inflation pulled back in December, easing to 5.1% from 5.5% in November and 5.9% in October. The consumer price index (CPI) was unchanged month-on-month in December, according to a statement released by Statistics South Africa (StatsSA).
“The December release concludes the results for 2023. The average inflation rate for the year was 6%, lower than 2022’s 6.9%. Inflation was relatively hot in the first five months of 2023 (January–May), with the headline rate consistently above 6%. Inflation eased below this level for the remaining seven months of the year. The highest reading in 2023 was 7.1% in March. The lowest was 4.7%, recorded in July,” StatsSA said.
The South African Reserve Bank (SARB) Governor, Lesetja Kganyago, told media outlets last week that he ruled out cutting interest rates as inflation is still too prevalent in the country.
Kganyago was speaking to Bloomberg TV at the World Economic Forum in Davos, Switzerland, and noted that while real rates are not as high as before, they are not where he wants them to be.
“Our real rates are not particularly high, and inflation has come down—it's within target—but it is not quite where we would like to see it,” Kganyago said.
“And if we are to make any policy adjustments, we would have to see that inflation has declined to our anchor, which is 4.5%.”
Kganyago also noted that he expected inflation to average 5% in 2024 and 4.5% in 2025.
Adriaan Pask, the chief investment officer at PSG Wealth said in a statement on Wednesday that the reading in headline inflation supports the view that the SARB could keep the repo rate steady at the monetary policy meeting today.
“If inflation continues to trend down, we believe the SARB could also start to cut interest rates later this year,” Pask said.
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